THOMAS JEFFERSON
Jefferson Signs Part of Hamilton's Assumption Plan: "An Act making Provision for the Debt of the United States"New York, NY 1790 - Printed Document Signed as Secretary of State. "An Act making Provision for the Debt of the United States," New York, N.Y., August 4, 1790. Certified a True Copy by Jefferson with his signature and signed in type by George Washington as President, John Adams as Vice President, and Frederick Augustus Muhlenberg as Speaker of the House. 8 pp., 9 x 13 1/4 in. "justice and the support of the public credit require, that provision should be made for fulfilling the engagements of the United States, in respect to their foreign debt, and for funding their domestic debt upon equitable and satisfactory terms." Partial Transcript"Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That reserving out of the monies which have arisen since the last day of December last past, and which shall hereafter arise from the duties on goods, wares and merchandise imported into the United States, and on the tonnage of ships or vessels, the yearly sum of six hundred thousand 600,000 dollars annually for support of government.Sec. 2. Be it further enacted, That the President of the United States be, and he is hereby authorized, to cause to be borrowed on behalf of the United States, a sum or sums, not exceeding in the whole twelve million of dollars; and that so much of this sum as may be necessary to the discharge of the said arrears and instalments, and (if it can be effected upon terms advantageous to the United States) to the paying off the whole of the said foreign debt, be appropriated solely to those purposes: And the President is moreover further authorized to cause to be made such other contracts respecting the said debt as shall be found for the interest of the said States. Provided nevertheless, That no engagement nor contract shall be entered into which shall preclude the United States from reimbursing any sum or sums borrowed within fifteen years after the same shall have been lent or advanced."Historical BackgroundTreasury Secretary Alexander Hamilton understood the necessity of placing the new nation on firm financial ground and proposed that the federal government assume Revolutionary-era state debts. Larger states such as Virginia (as well as those that had already paid down their deficits) balked, considering it unfair to reward states still in arrears. In a great compromise, the national capital was relocated south, to what is now Washington, D.C., in exchange for adopting Hamilton's financial plan. The plan resulted in the federal government assuming $21.5 million in debts (the amounts of each states' debt is listed on page 5), and payments were funded by new securities payable at a robust 6% interest.In actuality, there was no single "Assumption Act." Instead, Hamilton's assumption plan took four acts of Congress to implement. All were passed by the First Congress, Second Session, between August 4 and 12, 1790. The acts of August 5, 10, and 12, 1790 were designed to settle accounts, reduce the debt, or further address payment details.[1]This act, approved on August 4, was the first of the set as well as the lynchpin of Hamilton's plan. It laid out the specific amounts of state debt to be absorbed by the federal government, along with the fiscal scheme making it possible. Most of the debt had originally been held by ordinary citizens, but the payment arrangement was a boon to speculators, who had bought the worthless paper notes for pennies on the dollar. In addition to the impossibility of locating the original note holders, Hamilton's "rewarding" the speculators had multiple effects. It publicized that the U.S. financial system would honor its bills, reward risk, and give the holders of the now-federal debt a stake in the new government's success.Despite their differences, Jefferson and Hamilton reached the agreement over dinner on June 20, 1790. Jefferson agreed to support the Funding Act in return for moving the national capital to. (See website for full description)
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